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The US government is not ignoring the continued adoption that cryptocurrencies have been getting. Jerome Powell, the chair of the US Federal Reserve, noted that crypto could become another reserve currency.
Fed chair talks up the need for crypto regulations
While speaking before Congress today, Powell noted that the best option for government was to consider regulating cryptocurrencies. The Fed chair told members of the House Financial Service Committee that regulations need to be made for the crypto industry as soon as possible to prevent bad actors and uses.
We have this burgeoning industry which has many parts to it, and there isn’t in place the kind of regulatory framework that needs to be there, Powell said.
Comparing the crypto industry to the early years of the railroad and telephones, he added that what was need to was a framework to prevent unbacked cryptocurrencies from serving as “vehicles for terrorist financing and general criminal behavior like tax avoidance.”
Powell also touched on the Fed’s plans around a Central Bank Digital Currency (CBDC). He noted that a CBDC was unlikely to eliminate the use of private cryptocurrencies.
Although there has been massive pushback from other lawmakers, the US has been remarkably slow in its plans to launch a CBDC. Last week Powell stated that with the dollar serving as the world’s currency, it was important that a digital dollar is gotten right hence the lethargy. However, Powell has admitted that other currencies, including crypto, may emerge as global reserve currencies going by current happenings.
The Fed is still focused on combating inflation
While crypto was mentioned in the testimony, the major focus of the Congressional hearing remained growing inflation. Powell revealed that this month, the Fed would be increasing interest rates by 25 basis points.
The chair added that more increases were likely to follow as the Fed monitors economic data and makes suitable adjustments to monetary policy. He remarked that inflation is expected to reduce as the year proceeds and supply chain constraints ease.
We will use our policy tools as appropriate to prevent higher inflation from becoming entrenched while promoting a sustainable expansion and a strong labor market, he said.
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